Homepage
PR Newswire
13-11-2011, 06:17 AM
The Straits Times
Nov 13, 2011
Tips for riding through the market volatility
Investors should adopt long-term view and remember diversification is key strategy in their portfolios
By Patrick Tse
Equity markets around the globe have been sailing on a rough course, and many investors are worried about which direction their investment is heading.
Concerns are being raised because of the deep sovereign debt issues in both Europe and the United States, and the ability of policymakers to rescue their countries from drowning in a pool of debt.
Consequently, growth in most developed economies has slowed, which has dampened investor sentiment and caused increased volatility.
While steps have been taken to assist economies to get back on track, many of the problems are structural in nature and may take some time to resolve. So what should investors do during this period of uncertainty?
Some investors are selling their equities, sitting back in cash and plan to buy back into the market when the storm has cleared. But through these difficult times, it is important to remain focused.
Investors should seek quality investment options that provide long-term growth and remember that diversification among asset classes and regions is key in reducing the amount of volatility in their portfolio.
•Look on the bright side
If investors could take a step back and have a look at opportunities, rather than focus on the doom and gloom, they will see that corporate earnings are still strong, presenting opportunities in equity markets.
Valuations based on price-to-earning ratios on many markets are at 10 times or below, implying an earnings yield to shareholders in excess of 10 per cent.
Emerging markets continue to anchor global growth. Inflation has started to decline across some emerging economies, reflecting the impact of recent tightening in monetary conditions.
Growth is expected to remain strong, driven by rising domestic consumption and growth, especially in Asian markets such as China and India.
While fundamentals remain buoyant, valuations are attractive, interest rates in the developed world are at multi-year lows, and emerging market equities continue to look favourable on a long-term view.
Although global growth estimates are being revised down based on consensus estimates, the Asia ex-Japan region's gross domestic product growth is expected to stay at above 7 per cent on average this year and next, much higher than other regions across the world. Strong financial conditions and high cash positions of Asian companies should be positive to their earnings outlook.
•Back to basics
Market corrections occur from time to time and are part of the stock market's normal cycle. While these can sometimes be a cause for concern, it is important to remember that even though market moves can be rather dramatic on a day-to-day basis, they do follow long-term cycles.
Everyone wants a piece of the cake when markets are booming, largely because of a fear of missing out.
Then when markets are down, many investors run for the hills, putting their money somewhere safer until the downturn is over.
However, trying to time when to invest in the market is notoriously difficult and sometimes the best time to invest probably feels like the worst.
With markets so hard to predict, it pays to take a long-term view to spread investments over time.
Dollar-cost averaging is one of the fundamentals of quality investing.
It simply means investing at regular intervals and averaging out the cost of the units the investor buys in the stock or fund over time.
Markets fluctuate, so by investing regularly, an investor can help reduce the impact of short-term volatility and maximise the value of an investment over the long term.
•Remain calm
The level of volatility an investor may experience is dependent on the markets and asset classes in which they are invested.
Investors should be well aware of the potential risks and returns of each investment. For example, lower risk investments such as bonds, potentially result in more consistent returns.
However, these returns are typically not as high as investments with relatively high risk, such as equities.
Remember, markets move up and down every day but it is the long term that counts.
In the current environment, even minor snippets of economic data are causing a dramatic reaction in the markets.
During this period of volatility and uncertainty, investors should stay calm and ride through the storm.
The writer is chief executive officer, HSBC Global Asset Management Singapore.
Nov 13, 2011
Tips for riding through the market volatility
Investors should adopt long-term view and remember diversification is key strategy in their portfolios
By Patrick Tse
Equity markets around the globe have been sailing on a rough course, and many investors are worried about which direction their investment is heading.
Concerns are being raised because of the deep sovereign debt issues in both Europe and the United States, and the ability of policymakers to rescue their countries from drowning in a pool of debt.
Consequently, growth in most developed economies has slowed, which has dampened investor sentiment and caused increased volatility.
While steps have been taken to assist economies to get back on track, many of the problems are structural in nature and may take some time to resolve. So what should investors do during this period of uncertainty?
Some investors are selling their equities, sitting back in cash and plan to buy back into the market when the storm has cleared. But through these difficult times, it is important to remain focused.
Investors should seek quality investment options that provide long-term growth and remember that diversification among asset classes and regions is key in reducing the amount of volatility in their portfolio.
•Look on the bright side
If investors could take a step back and have a look at opportunities, rather than focus on the doom and gloom, they will see that corporate earnings are still strong, presenting opportunities in equity markets.
Valuations based on price-to-earning ratios on many markets are at 10 times or below, implying an earnings yield to shareholders in excess of 10 per cent.
Emerging markets continue to anchor global growth. Inflation has started to decline across some emerging economies, reflecting the impact of recent tightening in monetary conditions.
Growth is expected to remain strong, driven by rising domestic consumption and growth, especially in Asian markets such as China and India.
While fundamentals remain buoyant, valuations are attractive, interest rates in the developed world are at multi-year lows, and emerging market equities continue to look favourable on a long-term view.
Although global growth estimates are being revised down based on consensus estimates, the Asia ex-Japan region's gross domestic product growth is expected to stay at above 7 per cent on average this year and next, much higher than other regions across the world. Strong financial conditions and high cash positions of Asian companies should be positive to their earnings outlook.
•Back to basics
Market corrections occur from time to time and are part of the stock market's normal cycle. While these can sometimes be a cause for concern, it is important to remember that even though market moves can be rather dramatic on a day-to-day basis, they do follow long-term cycles.
Everyone wants a piece of the cake when markets are booming, largely because of a fear of missing out.
Then when markets are down, many investors run for the hills, putting their money somewhere safer until the downturn is over.
However, trying to time when to invest in the market is notoriously difficult and sometimes the best time to invest probably feels like the worst.
With markets so hard to predict, it pays to take a long-term view to spread investments over time.
Dollar-cost averaging is one of the fundamentals of quality investing.
It simply means investing at regular intervals and averaging out the cost of the units the investor buys in the stock or fund over time.
Markets fluctuate, so by investing regularly, an investor can help reduce the impact of short-term volatility and maximise the value of an investment over the long term.
•Remain calm
The level of volatility an investor may experience is dependent on the markets and asset classes in which they are invested.
Investors should be well aware of the potential risks and returns of each investment. For example, lower risk investments such as bonds, potentially result in more consistent returns.
However, these returns are typically not as high as investments with relatively high risk, such as equities.
Remember, markets move up and down every day but it is the long term that counts.
In the current environment, even minor snippets of economic data are causing a dramatic reaction in the markets.
During this period of volatility and uncertainty, investors should stay calm and ride through the storm.
The writer is chief executive officer, HSBC Global Asset Management Singapore.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
